From left, Alexei Mordashov, Vladimir Putin and Suleyman Kerimov. (Illustration by Frank Hulley-Jones/The Washington Post; Photographs by, from left, Mikhail Svetlov/Getty Images, Wang Zhao/AFP via Getty Images, Mikhail Svetlov/Getty Images)
LONDON — Financial monitors at one of New York’s most storied banks were watching as hundreds of millions of dollars moved through offshore accounts.
The wire transactions — a dozen in all, totaling more than $700 million — were suspicious enough to officials at Bank of New York Mellon that they submitted a stream of alerts to the U.S. Treasury Department.
But the officials seemed completely unaware of who was truly behind the transactions, according to copies of the submitted reports. Even their attempts to track down the companies named on the wire transfers were, in some cases, spectacularly wrong, with one report erroneously linking a $100 million payment to a British merchant that “specializes in the sale of fruits and vegetables.”
In reality, the shifting funds were part of a vast offshore empire associated with Russian billionaire Suleyman Kerimov. His connection to those transactions almost a decade ago is discernible only now because of details in secret financial records obtained by the International Consortium of Investigative Journalists (ICIJ) and shared with The Washington Post.
Kerimov is one of Russia’s wealthiest individuals, a political ally of President Vladimir Putin and a member of Russia’s upper house of parliament, representing his native Dagestan. He was first put under sanctions by the United States in 2018. Britain and the European Union followed suit last month as part of a global crackdown in response to Russia’s invasion of Ukraine.
But the gaping holes in those bank reports — which now reside in a database maintained by Treasury — underscore how difficult it will be to locate, let alone freeze, assets connected to Kerimov and other Russian elites that have been moved into offshore accounts over the past decade.
U.S. officials described the task of penetrating the layers of shell companies and proxies that cloak many oligarchs’ holdings as one of the most difficult-to-execute aspects of the economic assault against Russia.
“Russian elites and oligarchs are probably some of the best in the world at hiding their wealth,” said a senior Treasury official involved in directing the sanctions policy. The official spoke on the condition of anonymity, citing the sensitivity of the subject. Luxury yachts, lavish homes and private jets are relatively easy to pursue because they are “out in plain sight,” the official said. “The thing that’s going to be hardest is places where people have set up front companies to hide their assets.”
A spokesperson for Bank of New York Mellon, since renamed BNY Mellon, said the firm “takes its role in protecting the integrity of the global financial system seriously,” but declined to answer questions about the reports the firm submitted, including whether it made any subsequent filings linking the transactions to Kerimov.
Kerimov is among more than 4,000 Russian individuals whose names have appeared in vast troves of secret offshore financial records obtained by the ICIJ in recent years. Among them is a collection of more than 11.9 million documents known as the Pandora Papers, which was the basis for an investigative series published by The Post and international partners last year.
Russians outnumber other nationalities on the lists of individuals who have turned to the law firms and financial advisers that cater to global elites seeking to shelter their assets in Panama, the Cayman Islands and other tax havens.
Details in this article are drawn from those troves as well as a cache of intelligence reports maintained by the U.S. Financial Crimes Enforcement Network, a unit of the Treasury Department that is the main repository for reports that banks by law must file to flag suspicious transactions. The FinCEN Files, as that collection is known, was obtained by BuzzFeed News and shared with the ICIJ.
The records provide extraordinary insight into the tactics that oligarchs have employed to hide or otherwise protect their wealth in an economic arms race that has intensified since Russia invaded Ukraine. The United States has imposed sanctions on more than 500 Russian individuals in the ensuing six weeks and moved to shore up its ability to enforce those measures.
The Biden administration has requested millions of dollars in new federal funding for forensic teams at Treasury, created a “KleptoCapture” unit at the Justice Department and formed an international task force with allies to share financial intelligence. The name of the task force, REPO, is shorthand for its quarry: Russian elites, proxies and oligarchs.
But despite unprecedented cooperation among Western governments, there are still disparities in the sanctions lists adopted by the United States and its allies, as well as loopholes being exploited by oligarchs.
Such vulnerabilities were exposed last month when Alexei Mordashov, who was recently ranked by Forbes magazine as Russia’s richest individual, sold most of his shares in one of Europe’s largest travel conglomerates, the firm said, to a shell company in the British Virgin Islands, possibly shielding $1.4 billion from European sanctions.
Mordashov, 56, is the largest shareholder in Severstal, a steel and mining conglomerate that has touted the use of its high-strength materials in Russian armored vehicles. European sanctions authorities also cited his stakes in a Russian bank that has enriched Putin allies, as well as in media companies accused of broadcasting anti-Ukraine propaganda.
His 213-foot yacht, the Lady M, was recently seized by Italian police enforcing European sanctions. But Mordashov may have succeeded in moving other assets beyond the reach of European authorities.
Mordashov’s sale of a nearly 30 percent stake in TUI Group, the German travel company, was disclosed after the Russian invasion of Ukraine was underway but before he was hit by European sanctions, according to statements from TUI.
TUI at first said it didn’t know who owned or controlled the shell company, Ondero Ltd., that had suddenly become one of its major shareholders. Only after Mordashov received a list of detailed questions from ICIJ reporters — citing details discovered about Ondero in the Pandora Papers — was the mystery buyer identified.
The next day, TUI said it had been “informed” that Ondero was owned by Marina Mordashova, who is described in media reports as the oligarch’s wife.
Experts said this transaction is likely to succeed, at least for now, in blunting the impact of European sanctions. Unlike the most recent sanctions implemented by the United States, the European measures do not generally include provisions to cover relatives of the main target.
Mordashov has not been hit with sanctions so far by the United States. His name did not appear on a publicly released version of a list of “priority” sanction targets that Treasury recently distributed to allies. Former officials and experts said, however, that he is probably in the U.S. government’s crosshairs.
“We’ve also privately shared a list of [additional] names we want to go after,” the senior Treasury official said when asked about Mordashov and other oligarchs who so far have not been placed under U.S. sanctions. The official declined to elaborate.
In a written statement, Mordashov did not respond directly to detailed questions but described the Russian invasion of Ukraine as a “tragedy for two fraternal nations.” He added, “I have absolutely nothing to do with the emergence of the current geopolitical tension and I do not understand why the E.U. has imposed sanctions on me.”
Suspected Kremlin ties
Two years ago, it was Kerimov who was listed by Forbes as Russia’s richest man, propelled into that position by a spike in gold prices that drove up the value of his family’s 76 percent stake in Russia’s largest gold mining company, PJSC Polyus. His fortune has fallen since then but still hovers around $13 billion, according to Forbes.
On Wednesday, Polyus disclosed that its largest shareholder, Kerimov’s son, Said, had sold a 30 percent stake in the company. The move reduced the Kerimovs’ holdings in Polyus below 50 percent, potentially protecting the company from sanctions.
Kerimov, 56, is a reclusive figure who rarely grants interviews but is known for ostentatious displays. As his wealth surged, he routinely staged lavish parties that reportedly included performances by Shakira and Beyoncé. In 2006, he was badly burned after crashing a $650,000 Ferrari into a tree on a boulevard along the Mediterranean coast of France.
A trained economist, he made his initial fortune by acquiring early stakes in Russian corporations, including Sberbank and Gazprom, that went on to become dominant forces in banking and fossil fuels. He did so with the aid of billions of dollars in loans from Kremlin-backed banks, according to U.S. officials and accounts by journalists.
The ability of a relative unknown to borrow such massive amounts gave rise to speculation among Russia experts and Western officials about Kremlin connections. That suspicion gained further traction in 2016 when ICIJ media partners reported that companies tied to Kerimov had paid $200 million to offshore entities linked to Sergei Roldugin, a cellist and early friend of Putin. In Russian state media, Roldugin has denied any wrongdoing and said that the accounts in question held donations from wealthy Russians used for purposes including purchasing instruments for needy musicians.
In the latest sign of Kerimov’s status with Putin, he was among several dozen business leaders summoned for a meeting with the Russian president on the day the country’s armed forces launched the invasion of Ukraine.
Kerimov’s career has been marked by allegations of corruption. In 2017, for example, he was arrested by French police at the airport in Nice and accused by prosecutors in that city of money laundering and tax evasion in connection with the purchase of four villas on the French Riviera for more than $100 million.
That investigation called attention to Kerimov’s long-standing association with a Swiss accountant and investor, Alexander Studhalter, suspected by French prosecutors of functioning as a “straw man,” secretly holding the villas on behalf of the oligarch. An investigative judge wrote that “the effective and exclusive beneficiary of the villas is Mr. Kerimov and his family,” according to French court documents.
The cases against the men were dropped after the Kremlin intervened diplomatically on Kerimov’s behalf. Russian officials said that, as a lawmaker, Kerimov had diplomatic immunity, and Kremlin spokesman Dmitry Peskov said at the time that “intensive work is now being undertaken by the foreign ministry.” But a company associated with Kerimov and Studhalter paid a fine of 1.4 million euros and an additional 10 million euros in back taxes as part of a settlement.
Nikita Sichov, a lawyer in Cannes, France, whose firm represents Kerimov, did not respond to a detailed request for comment, saying only that after years of investigation, French authorities did not file a formal complaint.
In a written response to questions submitted by the ICIJ, Studhalter denied any wrongdoing and said that he had been “the sole owner of these properties” and that Kerimov had merely been a “tenant of one of the villas, but never had any ownership.”
The alleged arrangement on the Riviera fits a pattern of connections between the two men that point to Studhalter’s role in Kerimov’s empire. Their names intersect repeatedly in the Pandora trove, with documents showing that Studhalter was active in setting up companies linked to Kerimov and his family.
Studhalter, by his own account, was the registered owner of the Ferrari that Kerimov crashed on the Côte d’Azur, as well as a $150-million yacht widely reported to belong to the oligarch. The Swiss accountant also served as chairman of a philanthropic entity initially known as the Suleyman Kerimov Foundation that was established under the auspices of Kerimov’s children in Switzerland and funded by assets transferred by their father, according to a report in the FinCEN files.
The amount of money that appears to have flowed between Kerimov and Studhalter was at times staggering. A document in the Pandora trove, for example, describes loans totaling nearly $3 billion made between 2012 and 2015 by a British Virgin Islands firm listed in corporate records as being owned by Studhalter to a separate company controlled by Kerimov’s family.
Studhalter’s signature appears on two 2016 registration documents identifying him as the owner of the offshore company, Fren Global, that made the loans. When asked about the matter, Studhalter claimed not to recognize what he described as a “distorted electronic signature” and said he had sold Fren Global to Kerimov’s nephew in 2014.
The nephew, Nariman Gadzhiev, responded via text when asked about that transaction: “I confirm the statements of Mr. Studhalter.” Gadzhiev is linked to other business ventures with his billionaire uncle, according to documents and media reports. He declined to address any other questions.
A website, alexanderstudhalter.com, highlighting Studhalter’s interests and activities described his main business as co-investing in various ventures with Kerimov. It has since been taken down. In his response to questions, Studhalter said he “isn’t and wasn’t the owner of this domain and doesn’t know its content.” His Swiss firm has been closely associated with managing Russian wealth for years, a fact noted in a 1993 Post story that quoted Studhalter’s father.
In a statement this month to The Post, a representative for Studhalter said that the Swiss accountant “has neither created nor maintained offshore companies for Mr. Kerimov.” The representative, Philippe Blangey, said that Studhalter and Kerimov “invested in joint projects” and that “since the termination of Mr. Studhalter’s activities in Russia in 2017, all of his offshore companies have been gradually liquidated and none exist today.”
Gaps in reports
The alleged property fraud in France roughly coincided with the period when officials at BNY Mellon filed the flurry of suspicious activity reports (SARs) about wire transfers involving accounts linked by Pandora documents to Kerimov.
The gaps in those reports reflect the opacity of the transactions but also raise questions about BNY Mellon’s effort to seek answers.
One of the reports submitted by the bank centered on the 2013 transfer of $270 million to a shell company in the Cayman Islands. Records in the Pandora trove show that the company, SH Advisors, was owned by another shell company that was in turn owned by the Suleyman Kerimov Foundation.
The money was sent to the shell company by an entity called Nitokris Ltd. registered in Cyprus. Once again, bank officials seemed baffled about who was behind it, erroneously identifying Nitokris as a firm owned by a Hungarian economics professor.
The professor, Balazs Markus, said in an email exchange with the ICIJ that he does operate a company in Hungary with the same name but had never heard of the Cyprus-based entity. The Pandora documents do not show who owns the Cyprus-based Nitokris Ltd.
In 2014, BNY Mellon made another mistake, filing a report on a $100 million transfer to an offshore entity called LT Trading. Searching online for that name led compliance officers to link the payment to a British fruit and vegetable merchant, according to a copy of the document.
But a separate LT Trading was listed in British Virgin Islands corporate records as owned by Gadzhiev, Kerimov’s nephew.
The $100 million payment to that firm came from another company, Fletcher Ventures, that had been registered in the British Virgin Islands, according to documents.
In his written response, Studhalter said that Fletcher “was a subsidiary of a holding company” that he “100% owned.” He added that the transactions “involved the financing of real estate investments, a long-term activity” of his Swiss enterprise.
Studhalter reacted dismissively to questions about why BNY Mellon officials had flagged transactions involving companies to which he and Kerimov were connected. “The authorities would have taken action a long time ago … if these SARs had any significance,” he said. “Which they apparently did not as all transactions were clean, correct and verifiable.”
BNY Mellon, a historic institution that traces its lineage to Alexander Hamilton, essentially functioned as a conduit for the transfers that it reported, moving money on behalf of other banks where the companies in question had accounts. The bank did not answer questions about whether it had contacted other institutions to ask who was behind Fletcher, LT Trading and other shells.
In its statement, bank officials said that “as a trusted member of the international banking community, we fully comply with all applicable laws and regulations.” The bank did not respond to specific questions about the reports it filed.
The errors in the bank’s SARs and the absence of any reference to Kerimov point to potentially crippling inadequacies in the data collected by FinCEN, the agency that fields SARs, relays the most significant data to intelligence and law enforcement agencies, and will serve as the repository for more-thorough ownership records required under new laws. Sanctions authorities expect to rely extensively on this data in their efforts to locate the oligarchs’ assets.
The information gaps “are one of the challenges of FinCEN data,” the senior U.S. Treasury official said. “FinCEN and agencies like it in the U.K. and around the world are probably the critical piece of oligarch tracking.”
In recent weeks, as new sanctions were announced in response to the Russian invasion of Ukraine, Treasury has called on banks and other financial institutions to be more thorough in their scrutiny of transactions and more diligent in filing reports to FinCEN.
But even determined efforts to unmask the true owners of offshore accounts could lead down blind alleys.
Registration documents for Fletcher Ventures — which transferred the $100 million to the company controlled by Kerimov’s nephew — show that the firm is owned by someone named Renato Coppo, according to Pandora files.
That name matches the proprietor of a tattoo parlor in Lucerne, Switzerland, the city where Studhalter, the Swiss lawyer and Kerimov associate, is based. In his written response, Studhalter said that Coppo was not the owner of Fletcher, “but an employee.”
When Swiss reporters working with the ICIJ approached Coppo at his tattoo and piercing studio, he refused to discuss his connection to Fletcher. Instead, he referred questions to Studhalter.